STEVE INSKEEP, HOST:
Some other news: We have a more complicated view, this morning, of the scandal at the IRS. An inspector general critiqued the tax agency's targeting of conservative groups, many of them linked with the Tea Party movement. We knew that much.
And now, it's become apparent that more liberal or progressive groups were also targeted. NPR's Tamara Keith reports.
TAMARA KEITH, BYLINE: Maryann Martindale applied for tax-exempt status for her group, the Alliance for a Better Utah, in September of 2011. When she heard back from the IRS, the agency asked her about her group's activities and donors.
MARYANN MARTINDALE: We were asked what type of donors we had; if we had candidates, political organizations, parties and such - any of that type of group, anything like that; if we'd had any donors that fit under any of those categories. We didn't.
KEITH: In many ways, Martindale's experience sounds like that of the Tea Party groups flagged for extra scrutiny by the IRS. One big difference - her group's progressive leanings.
MARTINDALE: We don't affiliate directly with either party, but I would say that in terms of position or ideology, we would align closer with the Democrats.
KEITH: Alliance for A Better Utah secured its tax-exempt status as a 501(c)(4) social welfare group in June 2012. The group also applied for a 501(c)(3) charitable status for its voter-education work. Both groups can keep their donor names secret, but only the (c)(3) can offer them a tax deduction. And Martindale says she's still waiting on that.
MARTINDALE: As it's approaching 600 days, we've bent over backwards to prove that we really are not doing anything beyond reproach of a (c)(3) organization ,but yet we still are waiting for that designation. It's really tough, let me just put it that way. It's just - it's really tough.
KEITH: And while she waits, Martindale says her group has suffered, missing out on donations and grants.
PAT ZAHAROPOULOS: I'm Pat Zaharopoulos. I'm president of Middle Class Taxpayers Association of San Diego.
KEITH: And her group was also flagged by the IRS. It's on a list of 176 organizations the IRS says were pulled aside for further review and ultimately, granted nonprofit status. Middle Class Taxpayers Association of San Diego is progressive and takes positions on issues and initiatives, but not candidates.
ZAHAROPOULOS: We got - our final approval came May 9 of this year, and we applied July 9, 2010.
KEITH: When they finally got the letter from the IRS, Zaharopoulos says they celebrated. It had been almost three years of waiting, and answering questions from the IRS. [POST-BROADCAST CORRECTION: In reality the process took about a year.]
ZAHAROPOULOS: While we were impatient about it, we were certainly not offended that they took the time to evaluate.
KEITH: These groups are part of what Martin Sullivan describes as a substantial minority of those on the IRS list. He's chief economist at Tax Analysts.
MARTIN SULLIVAN: And if you look down the list - you can eyeball it and readily see that many certainly were conservative groups; and you could also see that many weren't. And so I just started doing web searches on each of these groups.
KEITH: The list released by the IRS offers an incomplete view. It doesn't tell us how many of the groups that applied for tax-exempt status were conservative or liberal. It doesn't tell us how long each group waited. And it also doesn't tell us why they were flagged for further scrutiny. What the inspector general's report shows is that Tea Party and Patriot groups were targeted based on their names or their views. And that, virtually everyone agrees, was improper. Again, Sullivan.
SULLIVAN: There still can be bias; there still can be all - other types of problems with what the IRS has done. But the one fact that it's brought out is that about 30 percent were not conservative groups and therefore, it was not only conservative groups who were being targeted.
KEITH: Sean Soendker Nicholson knows that firsthand. He's the executive director of Progress Missouri, and waited about a year before getting a letter from the IRS asking a series of questions.
SEAN SOENDKER NICHOLSON: Please provide a more detailed description of the actual activities you have conducted since your formation; as well as activities you plan to conduct within the next year, and how these activities serve social welfare purposes.
KEITH: Shortly after responding, Progress Missouri was approved. And as he sees it, the scrutiny was a good thing. He just hopes it wasn't only small groups like his who were getting all the attention, since some 501(c)(4)s spent tens of millions of dollars in the last election.
TARA MALLOY: The methodology that the IRS used was clearly, unjustifiable.
KEITH: Tara Malloy is a lawyer at the Campaign Legal Center, which is pushing for the IRS to scrutinize 501(c)(4) groups. She says the fact that progressive groups were also screened doesn't excuse the way the agency went about flagging Tea Party groups. But Malloy says the IRS should be examining organizations with political activity.
MALLOY: It makes perfect sense that the IRS has an obligation to determine that you actually are eligible for this exemption from taxation; and that it's a meaningful review, not just a rubber stamp.
KEITH: Her concern is that all the blowback from inappropriately targeting conservative groups will make the IRS back down from the reviews it really should be doing.
Tamara Keith, NPR News, the Capitol.
(SOUNDBITE OF MUSIC) Transcript provided by NPR, Copyright NPR.
